Innovative methods of determining health expenditure efficiency are urgently needed
Authors: Zhong Cao, Simiao Chen
Journal: The Lancet Global Health (2023)

Cost-effectiveness thresholds have a crucial role in health economics. They are used by researchers, health-care providers, and policy makers to evaluate the efficiency of health-care spending, prioritise investments, and allocate limited resources. Existing types of cost-effectiveness threshold—arbitrary rules of thumb, demand-side thresholds, and supply-side thresholds—all have drawbacks. Examples of rule-of-thumb cost-effectiveness thresholds include those used in the USA (US$50 000–$100 000 per quality-adjusted life-year [QALY]) and the UK (£20 000–£30 000 per QALY).1Grosse SD Assessing cost-effectiveness in healthcare: history of the $50,000 per QALY threshold.Expert Rev Pharmacoecon Outcomes Res. 2008; 8: 165-178Crossref PubMed Scopus (501) Google Scholar WHO has previously recommended setting cost-effectiveness thresholds at one to three times the national gross domestic product (GDP) per capita, a practice that remains common. However, critics contend that arbitrary rules of thumb are not sufficiently grounded in empirical evidence or clear theoretical rationale, are disconnected from health opportunity costs, and disregard local budget constraints.2Chi Y-L Blecher M Chalkidou K et al.What next after GDP-based cost-effectiveness thresholds? [version 1; peer review: 2 approved].Gates Open Res. 2020; 4: 176Crossref PubMed Scopus (26) Google Scholar By contrast, demand-side cost-effectiveness thresholds (typically in the range of 0·5–1·5 times GDP per capita3Iino H Hashiguchi M Hori S Estimating the range of incremental cost-effectiveness thresholds for healthcare based on willingness to pay and GDP per capita: a systematic review.PLoS One. 2022; 17e0266934Crossref Scopus (11) Google Scholar) are grounded in a willingness to pay for health improvements. However, these thresholds might not always help to achieve desired population health outcomes when the health budget is fixed, and could potentially increase health inequalities.4Gloria MAJ Thavorncharoensap M Chaikledkaew U Youngkong S Thakkinstian A Culyer AJ A systematic review of demand-side methods of estimating the societal monetary value of health gain.Value Health. 2021; 24: 1423-1434Summary Full Text Full Text PDF PubMed Scopus (6) Google Scholar Finally, supply-side cost-effectiveness thresholds are based on the actual costs of delivering health-care interventions per unit of health outcome (eg, QALY) gained. Such thresholds can be challenging to estimate, particularly in low-income and middle-income countries (LMICs) where data on health-care costs and outcomes might be scarce.5Sampson C Zamora B Watson S et al.Supply-side cost-effectiveness thresholds: questions for evidence-based policy.Appl Health Econ Health Policy. 2022; 20: 651-667Crossref PubMed Scopus (5) Google Scholar Andres Pichon-Riviere and colleagues6Pichon-Riviere A Drummond M Palacios A Garcia-Marti S Augustovski F Determining the efficiency path to universal health coverage: cost-effectiveness thresholds for 174 countries based on growth in life expectancy and health expenditures.Lancet Glob Health. 2023; 11: e833-e842Summary Full Text Full Text PDF Scopus (1) Google Scholar propose a new conceptual framework for estimating cost-effectiveness thresholds and empirically derive such thresholds for 174 countries using publicly available data. Under this framework, country-level cost-effectiveness thresholds emanate from goals defined by decision makers for future (health-adjusted) life expectancy and health expenditure per capita. To illustrate how cost-effectiveness thresholds are empirically derived under this framework, the authors assume that a reasonable benchmark is to maintain historic trends in country-income groups in the evolution of these indicators. Interventions with incremental cost-effectiveness ratios lower than the derived threshold are considered more cost-effective, with smaller percentage increases in health expenditures for the same additional gain in life expectancy or QALYs projected by the country-income-group trend. Using this method, Pichon-Riviere and colleagues found that national cost-effectiveness thresholds per QALY ranged from US$84 to $95 958 across all 174 countries and were less than half of GDP per capita in 96% of low-income countries. In general, the cost-effectiveness thresholds calculated by Pichon-Riviere and colleagues are lower (or stricter) than the thresholds used by many countries, particularly LMICs, which have historically faced more restrictive health-care budgets than high-income countries. This innovative framework has several advantages. First, relative to supply-side cost-effectiveness thresholds, it provides a more straightforward method of threshold estimation that is more easily understood by policy makers and is directly relevant to budget holders and health outcomes. Second, this method is based on publicly available health expenditure and life expectancy data, making it more accessible to countries with little data, especially LMICs. Third, the framework is better empirically supported by country-specific evidence than demand-side or rule-of-thumb methods when estimating health opportunity costs. Although this method might not be as robust as supply-side methods in terms of evidence, it remains a noteworthy empirical framework widely supported by macro data in the current data-constrained context. The study also has some limitations. As is typical for a study of this scope and size, the assumption is made that each country's health-care efficiency aligns with the median health-care efficiency of countries at the same income level, primarily because of the unavailability of country-specific data. In addition, an implicit assumption is made that the average annual country-level rates of increase in health expenditure and life expectancy are projected to hold steady. Consequently, the study findings might be more applicable to countries that have a level of health efficiency near the median for their country-income group and to time periods during which no major health or economic shocks (eg, the COVID-19 pandemic) occur. Determining an appropriate cost-effectiveness threshold is the first step to establishing health expenditure efficiency. Two issues with health expenditure efficiency generally are often neglected by policy makers but are important for resource allocation. The first issue pertains to rationally determining the total range of resources to be allocated to health. Researchers emphasise that the macro-level efficiency is currently low in most countries, and highlight that the major and urgent issue in many countries is underinvestment in health at the macroeconomic level.7Chen S Kuhn M Prettner K Bloom DE Wang C Macro-level efficiency of health expenditure: estimates for 15 major economies.Soc Sci Med. 2021; 287114270Crossref PubMed Scopus (7) Google Scholar This finding raises the question of the amount of resources that a country should allocate to health care—ie, the optimal health expenditure share of a country's national GDP to maximise population welfare. The second issue is that relying solely on health outcome measures such as disability-adjusted life-years (DALYs) or QALYs might be an inappropriate means of determining resource allocation for health,8Remme M Martinez-Alvarez M Vassall A Cost-effectiveness thresholds in global health: taking a multisectoral perspective.Value Health. 2017; 20: 699-704Summary Full Text Full Text PDF PubMed Scopus (27) Google Scholar because such measures do not account for the broader social and economic benefits that health interventions can yield in addition to health improvements.9Chen S Kuhn M Prettner K Bloom DE The global macroeconomic burden of road injuries: estimates and projections for 166 countries.Lancet Planet Health. 2019; 3: e390-e398Summary Full Text Full Text PDF PubMed Scopus (93) Google Scholar, 10Chen S Cao Z Prettner K et al.The global economic cost of 29 cancers from 2020 to 2050: estimates and projections for 204 countries and territories.JAMA Oncol. 2023; (published online Feb 23.)https://doi.org/10.1001/jamaoncol.2022.7826Crossref Scopus (2) Google Scholar The reliance on QALYs and DALYs in current cost-effectiveness thresholds might therefore lead to underestimation of the value of health interventions. Future methods of assessing the efficiency of health interventions could potentially incorporate economic and social benefits to more rationally allocate societal resources. In summary, innovative methods of determining the efficiency of health expenditure are urgently needed to make better use of resources both within the health sector and in society generally. We declare no competing interests. This article was funded by the Chinese Academy of Engineering (project number 2022-XBZD-14), the Chinese Academy of Medical Sciences and Peking Union Medical College (project number 2022-CFT-QT-016), and Horizon Europe (HORIZON-MSCA-2021-SE-01; project number 101086139-PoPMeD-SuSDeV). Determining the efficiency path to universal health coverage: cost-effectiveness thresholds for 174 countries based on growth in life expectancy and health expendituresThis approach, based on widely available data, can provide a useful reference for countries using economic evaluations to inform resource-allocation decisions and can enrich international efforts to estimate cost-effectiveness thresholds. Our results show lower thresholds than those currently in use in many countries. Full-Text PDF Open Access